By Ben Howell
Amidst the ‘Cost of Living Crisis’, restaurants have seemingly been increasing their prices in some unspoken competition against one another to be the one that gouges their customers the most. Whilst we all know that one independent burger joint with exposed-brick interior walls, stalls pulled from a sweatshop production line and £20 burgers (fries not included and synthetic, cheese-substitute costing an additional £2), the biggest surprise has been the insane jump in prices implemented by major chains. The worst offenders: TGI Fridays and Five Guys. Given their eye-watering prices, consumers could be forgiven for thinking that these brands must be raking in a fortune, but with TGI Fridays having recently been rescued from bankruptcy by private equity, forced to lay-off roughly 1,000 workers and close 35 locations, it seems that this is far from the truth.
Even industry giant McDonalds has been forced to raise prices on average by 100% since 2014, and Subway footlongs – famously priced at $5 in 2011- can now cost as much as $17.85. Industry changes, such as the rise in the price of meat, rent, utility and labour costs, coupled with reduced consumer spending have forced restaurants to raise prices. Paradoxically, this has reduced diner counts, further encouraging restaurants to increase prices. Worth noting, also, is the introduction of “table fees", "service charges” and optional (provided you don’t mind seeming apathetic to the plight of the sea turtles) donations at restaurants, in addition to mounting expectations of tipping. Combined, this has markedly discouraged consumers from dining out so frivolously.
Perhaps the twilight of accessible dining-out was during the “Eat out to help out scheme” introduced by Rishi Sunak, the then Chancellor of the Exchequer. As part of this initiative, the government spent £849 million across 160 million meals to subsidize 50% of the price, up to £10 per person. While this scheme undoubtedly helped restart the food & beverage industry after Covid, it had the longevity of putting a napkin under a shaky table leg. The scheme did nothing to address the fundamental problems of the food industry such as increasing rent and utility costs, and was likely merely a populist attempt to appeal to voters. It furthermore seemingly forgot that we were in the middle of the biggest pandemic since the Spanish flu, and for the duration of August 2020, Rishi Sunak was redolent of Byzantine Emperor Justinian appeasing the plebs with bread and circuses whilst a plague killed 1/5th of the empire’s population.
Four years on and the food industry has seemingly not recovered from the Covid-19 pandemic with the average price of a main rising by 5.3% from July 2023. Physical restaurants now have to compete with online delivery platforms like Uber Eats, Deliveroo and Just Eat (which take almost 50% cuts from partnered restaurants), as well as the cooking skills consumers were forced to develop during quarantine. One interesting effect of this has been the appearance of “ghost kitchens”- makeshift kitchens which cook solely for takeout masquerading as real restaurants.
The slump in the food industry is exemplified by TGI Fridays which has failed to adapt to recent industry changes, such as prioritizing delivery, and remains offering mediocre dishes such as a £17 burger or the most disheartening nachos I have tried to date. In September 2024, the chain went into bankruptcy putting 87 restaurants up for sale across the UK. This followed the parent company’s, Hostmores, failed $177 million deal to acquire TGI Friday’s American operations. Hostmore’s share price subsequently took a nosedive of 96% following a reduction in annual income by 12%- something which the company’s ‘best and brightest’ consultants absurdly blamed on “warmer weather”. Having been in operation since the 1980s, it seems the restaurant’s (Fri)days are drawing to an end as rent and energy prices seem set to continue rising indefinitely.
However, there remains hope for TGI Fridays as Breal Capital and Calveton UK have acquired the firm following Hostmore’s winding up. Following this acquisition, 51 restaurants will remain open with the other 35 closing with immediate effect. Perhaps jettisoning 35 of the worst performing restaurants can help balance TGI Friday’s books, although the fact that the chain is negotiating with landlords on a deal to save the closed restaurants offers significant insight into the chain’s foremost issue: rent is just too high.
Whilst TGI Fridays UK has been propped up this time by private equity, none of the underlying industry issues have disappeared and seem set to only increase in the coming years. Increasing rent, energy and food costs have furthermore been exacerbated by the conflict in the Ukraine and climate emergency which have already shot the price of cooking oil up 42%. Going off of TGI Friday's troubles this autumn, the food & beverage industry should brace itself for some of it’s bleakest years yet.
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